Technically Speaking

Nov Beans and The Analyst Who Cried "Bull"

Source: DTN ProphetX

I'm sure most of you are familiar with Aesop's Fable "The Boy Who Cried Wolf". In a nutshell, a young shepherd boy is constantly fooling villagers by yelling that a wolf is attacking his flock. When a wolf actually does appear, and again he cries out, the villagers don't believe him. The sheep, and the boy, are then eaten by the wolf.

I love a story with a happy ending.

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Most of you are probably thinking the same thing is going on with this blog. Ten days ago a post was titled "Reversals of Fortune", talking about grains, including November soybeans, and bullish reversal patterns. Before that it was the week of March 30 (blog on April 4). Time and time again these bullish reversals have seemingly failed, with November soybeans falling from $9.74 1/4 (weekly close on April 3, 2015) to $9.04 1/4 (weekly close Friday, June 12).

Nevertheless, as I look at its weekly chart at mid-week, the Nov bean contract is in position (again) to establish a bullish reversal. Monday saw it post a new contract low of $8.95 3/4, but instead of triggering sell orders by the basketful from Watson (my term for computerized, algorithm-based, investment trade), the contract abruptly turned and rallied. By early Wednesday morning it had reached a high of $9.38 3/4, easily taking out last week's high of $9.31 3/4. In fact, depending on how the end of the week plays out, November soybeans could move above its 4-week high of $9.44 (dotted red line).

So yes, new-crop Nov beans are in position to establish another bullish reversal (Some would call it a key bullish reversal given the establishment of a new contract low. I tend to save that term for the monthly chart. (e.g. October 2014)), needing only a higher close this week. Last Friday's $9.04 1/4 settle was just off the weekly low of $9.00 1/2. That means from Wednesday through this Friday's close the contract has almost 30 cents of wiggle room.

There are a few other tools to keep an eye on as the week progresses: 1) Weekly stochastics (second study) continue to grow more bullish, building on the crossover below the oversold level of 20% the week of June 1. 2) Commercial buying has reemerged, as indicated by the weakening carry in the November to March futures spread (third study, green line). 3) Total trade volume (bottom study, purple histogram) needs to increase over last week's 1,272,023 contracts, something that looks doubtful given this week's 528,271 contracts (so far).

For now I'll say this again: November soybeans look to be growing more bullish as it establishes another reversal patter. And yes, the market is clinging to its major (long-term) bullish signals from last October as the Nov contract holds above $9.04.

You've heard this before I know, and yes, ultimately, this analyst could wind up being eaten by a bear.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

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Comments

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DARIN NEWSOM
6/19/2015 | 11:11 AM CDT
Well said Glenn. That is proof enough that anything, no matter how far-fetched, can happen.
Glenn Blomendahl
6/19/2015 | 10:44 AM CDT
I'm not gonna say its impossible - heck, the Royals made the World Series last year.
DARIN NEWSOM
6/18/2015 | 1:09 PM CDT
I appreciate the conversation. An update: Nov beans moved to a new 4-week high of $9.46 1/2 Thursday. Brad, great comment "rain sometimes makes pain".
andrew mohlman
6/18/2015 | 9:49 AM CDT
Amazing how a higher power equals things out.
Unknown
6/18/2015 | 9:13 AM CDT
Soybeans don't like wet feet; acreage, prevent plant might all be coming into effect; like you said before the technical already has the fundamentals in the market, they become clearer, after the move, the false moves before, just did not have the fundamentals to back it up, let's hope this one in the end, does; Rain sometimes makes pain. Brad Paumen Maple Lake Mn.
DARIN NEWSOM
6/18/2015 | 7:03 AM CDT
That's a great question John. If we go back to my On the Market column "Papillon's Escape" (from May 8), I talked about the importance of clearing last winter's high. For the DTN National Soybean Index that is the November peak of $10.08. Doing so would be a clear indication that the market is in the strong Wave 3 of a 5-Wave uptrend (Elliott Wave Theory). But what if we get there and fall back again? For now I will say that cash soybeans would remain bullish from a technical point of view, ultimately going above and beyond and confirming Wave 3 as I talked about over the course of my winter presentations (most notably at Commodity Classic last February). But, other technical indicators could come into play at that time.
JOHN HUSTON
6/18/2015 | 6:14 AM CDT
If we just get back to six month ago levels in the cash is it still a bull market?
JOHN HUSTON
6/18/2015 | 1:40 AM CDT
or was Edward Lear on to something.
JOHN HUSTON
6/18/2015 | 12:54 AM CDT
how can it be a bull if it was a steer just two months ago?